A wealth of credit and debit cards and electronic payment systems is making paper bills and coins increasingly obsolete. One researcher says Sweden could be cashless in less than two decades.

Niklas Arvidsson at the KTH Royal Institute of Technology in Sweden predicts that paper money and coins will disappear from Swedish society - "but probably not before 2030," he says.

Arvidsson, who has explored the future of currency and payment transactions, has no doubts about this trend. “Sweden will become cashless,” he concludes in his report, The Cashless Society.

Difficult to achieve

Nevertheless, “a completely cashless society would be very difficult to achieve – you would almost need a complete cash ban,” comments Arvidsson, who is a lecturer in industrial dynamics at KTH.

“It would also have to meet several requirements, such as good emergency backups. People would need to be able to pay even during power cuts, or when electronic systems crashed or were hacked. Currently cash payment is the only system that never fails, so it’s difficult to see how we could go totally cashless.”

Arvidsson’s research is based on interviews with representatives from banks, the business sector, mobile phone companies, service and infrastructure providers, card companies, trade unions, the Bank of Sweden and payment system authorities.

Popular among consumers

His research shows that slightly more men than women use cash, and that cash is more widely used in rural areas than in cities.

“One reason for continuing with cash is the number of consumers who still want to continue to use it, such as older people. PRO, the Swedish national organisation of pensioners, has been quite active on this issue,” says Arvidsson.

“To some degree this is a question of demographics, as the use of cash is more prevalent among the older population. Their habits have been formed over a long time, so it will be more challenging for them to change behaviour,” he states in his report.

Tipping point with costly cash

Over the short term it’s difficult to develop the same loyalty to mobile-based payment methods as for cash payments.

Nikals Arvidsson. (Photo: KTH)

The question is whether there is a ‘tipping point’ where we are pushed into a cashless society. “At this tipping point the costs of handling cash have become so high that no one – whether it’s the state, the banks, businesses or consumers - is prepared to pay for it, and instead prefers other means of payment,” the report suggests.

“At this stage payment systems will implicitly be expected to cover their own costs; in other words, there will be no way of subsidising cash transfers through fees on other payment methods.”

New banknotes on the way

An indicator that cash will be around for some time is the planned introduction of new Swedish banknotes in 2015 and 2016. With a similar life cycle as the previous batch of banknotes they could be expected to last till 2045 – provided that the security features hold up till then.

All the same, a number of electronic payment systems are currently vying to handle our money, particulary for simple money transactions such as transfers between two people.

Tax dodgers and criminals lose out

Not surprisingly, card companies and businesses would be the main beneficiaries of a cashless society – while ‘cash in hand’ tradespeople, tax dodgers and criminals stand to lose.

Arvidsson’s analysis suggests that since consumers are divided and the government is disengaged on this issue, banks will probably have the greatest potential to set the agenda for changing our cash habits.

“For the primary stakeholders – banks and businesses – it is highly probable that the positives outweigh the negatives,” Arvidsson's report concludes.

“It is first and foremost small businesses that risk having problems if the cash system is phased out - but given the competition between payment service providers and the lowering of fees, even small businesses will stand to see some benefits.”